Ditching electric competition would cost Texas - The Dallas Morning News

pandangsa.blogspot.com

This op-ed is part of a series published by The Dallas Morning News Opinion section to explore ideas and policies for strengthening electric reliability. Find the full series here: Keeping the Lights On.

Twenty years ago last month, Texas began its experiment to bring competition to its electricity market.

Competition truly was an experiment. Texas was attempting something that had never been done before in our country. Yet the desire to bring competition to electricity was widespread and bipartisan; Republicans and Democrats both knew the heavily regulated electric markets of the day were taking consumers to the cleaners.

Even with a few hitches along the way, competition proved wildly successful for consumers. Prices dropped, choices in retail electricity plans and providers rose, and the grid became more reliable as investors flocked to Texas to build new generation.

However, in the aftermath of the Great Texas Blackout in February, competition appears to be on the way out. Texas politicians are using it as a scapegoat to distract from their role in the grid failure. Yet embracing competition is the only way to restore reliability and affordability to our electric grid.

Despite its successes, competition has always had its detractors. Generators with little competitive experience worried about making money. Consumer advocates did not like the fact that competition left them little to advocate for. And Texas politicians and regulators got skittish because they were no longer in control of keeping the lights on.

Now, a new generation of politicians, regulators and generators have joined forces to push for reducing or eliminating competition in the Texas electricity market.

The latest to make headlines on this is Lt. Gov. Dan Patrick, who recently called for “constructing a managed capacity market where additional plants are built to provide emergency backup power.”

His rationale is that “in the Texas energy market, prices are used as an incentive for investors to build plants to come online when needed. That model served Texas well for many years, but it failed during the winter storm for many reasons while the cost of electricity skyrocketed.”

Patrick is correct when he says that using market prices to incentivize investment in new generation has worked. He is dead wrong, however, in saying the market failed during the winter storm.

It is true that prices skyrocketed during the winter storm. But most of the skyrocketing had nothing to do with market forces. Rather, wholesale prices rose to $9,000 per megawatt hour (as I write this, prices are about $21 per MWh) and stayed there for days because Gov. Greg Abbott’s appointees at the Public Utility Commission of Texas overrode the market price and set the price themselves.

The PUC’s actions cost Texas consumers and other market participants at least $16 billion. To his credit, Patrick led the Texas Senate in an attempt to reverse the PUC and refund the money. However, Abbott and the Texas House of Representatives refused to go along. Instead, the Legislature passed a number of anti-competitive measures that will hike Texans’ electricity prices for years as the billions are paid off.

It is also wrong to claim that market prices are the reason that Texas has recently failed to attract investments in reliable generation. What happened is that power plant developers spent years chasing the $24 billion in federal, state and local incentives paid out to Texas wind and solar farms, pouring about $66 billion of investment into wind and solar generation, according to energy expert Robert Bryce.

All that money went toward constructing intermittent wind and solar generation that is only as reliable as the weather. Instead, that money could have gone toward building generation that is as reliable as Texas’ plentiful supply of natural gas, coal and nuclear fuel. It is that missing $66 billion of reliable generation that resulted in the Great Texas Blackout of 2021.

If competition’s birth in Texas was bipartisan, the beginning of renewable energy subsidies was more so. Support for renewables started with legislation passed by a Republican Texas Senate and a Democratic Texas House and signed by Gov. George W. Bush. His successor, Rick Perry, doubled down on renewables in 2005 by successfully pushing for the CREZ transmission lines that opened up West Texas to the development of wind farms.

What may have begun as an effort to stimulate a new industry opened floodgates that have never been shut. The unintended, though predictable, results led to a generation mix that cannot be sustained.

Wind farm development took off early and led the way until recently, when solar began to rapidly increase. Since 2016, renewables have made up 87% of all new generation coming online, displacing many aging reliable sources of generation. A resource once touted as the answer to increasing the diversity of Texas generation sources is quickly overwhelming the system.

The good news is that both Patrick and Abbott called for putting “renewables and thermal energy on a level playing field” by making renewable generators “shoulder the cost of [their] failure” to meet the needs of Texas consumers when the wind is not blowing or the sun is not shining.

However, Patrick’s call for a “capacity market,” along with similar language from Abbott and proposed legislation from Rep. Chris Paddie, R-Marshall, must be rejected. To understand why, it is worth taking a look at an existing capacity market in the Northeast.

Capacity markets are bureaucratic creations that force consumers to pay generators twice. The first payment comes through auctions, such as one recently held by PJM, which operates the electrical grid for a 13 Northeast and mid-Atlantic states and is the largest capacity market in the U.S. As a result of that auction, consumers in the region will be forced to pay generators $3.9 billion just for existing over a period of one year. The second payment comes when consumers actually buy the electricity that they use.

Often billed as superior to actual markets, capacity markets do little to improve reliability. In fact, they are extremely inefficient and anticompetitive. A Texas Public Policy Foundation report in 2013 found that in PJM, “93% of [capacity payments] went to owners of existing generation and only 1.8% to new and reactivated units.”

Given the inefficient and anticompetitive nature of capacity markets, why would Texas politicians and generators be clamoring for one? Perhaps because of its redistributive nature.

A Texas capacity market would shift market influence from consumers to politicians and regulators; actions like the PUC’s recent costly price hike could become a regular occurrence. Such a market would also shift risk from generators to consumers. A number of generators went bankrupt in the competitive Texas market. That would almost never happen in a Texas capacity market; instead, consumers would foot the bill.

Finally, a Texas capacity market would redistribute money from consumers to big business; the Energy Alliance estimates that a capacity market would cost Texas consumers at least $4 billion per year (similar to the cost in PJM), all of which would go to generators, their lobbyists and Wall Street investors.

Rather than replacing competition with a capacity market, confronting the anticompetitive nature of renewable energy subsidies and the PUC’s market manipulation is the path to an affordable and reliable electricity market in Texas.

Electric competition will work, as long as Texas politicians stay out of the way.

Bill Peacock is the policy director of the Energy Alliance, a project of the Texas Business Coalition. He wrote this column for The Dallas Morning News.

Got an opinion about this issue? Send a letter to the editor and you just might get published.

Adblock test (Why?)

"electric" - Google News
July 18, 2021 at 01:30PM
https://ift.tt/3evZZB0

Ditching electric competition would cost Texas - The Dallas Morning News
"electric" - Google News
https://ift.tt/2yk35WT
https://ift.tt/2YsSbsy

Bagikan Berita Ini